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2020-2021 Fiji National Budget Report
Contents
Note from Senior Partner, PwC ...................................................................................... 1
At a Glance..................................................................................................................... 2
Spotlight on the Budget ..................................................................................................3
State of the Nation ..........................................................................................................4
Tax Measures ............................................................................................................... 12
Strategic Direction ........................................................................................................ 19
Budget Allocations ........................................................................................................ 21
Appendices................................................................................................................... 22
Appendix A: Customs and Excise Import Changes ...................................................... 23
Appendix B: Budget Allocations and Other Key Initiatives ............................................ 26
2 | Creating value beyond the dealNote from Snr. Partner | At a Glance | Spotlight on the Budget | State of the Nation
Tax Measures | Strategic Direction | Budget Allocations | Appendices
Note from Senior Partner, PwC
The Attorney-General and Minister for Economy, Civil Service and
Communications, Honourable Aiyaz Sayed-Khaiyum presented the 2020-2021 Fiji
Budget last evening.
COVID-19 has caused what the Minister described as a once in a century external
shock to the global financial systems, the economy, and people’s livelihoods. It has
caused the single largest contraction in the Fijian economy of 21.7%, with 115,000
Fijians (one third of the workforce) having had their hours reduced or lost their
jobs. Considering the prospect of a future fundamentally changed, and recognising
significant uncertainties, the Government has had to juggle with evolving dynamics
and has used the following set of principles to formulate its strategies:
• bringing back jobs, particularly in the tourism sector,
• providing safety nets for those who are unemployed and or had wage Nitin Gandhi
reductions, and Senior Partner, PwC Fiji
• stimulate investment and consumption with strategic and sustainable
Government initiatives creating a platform to encourage private sector
investment
The budget projects a net deficit of $2 billion or 20.2% of GDP, with total revenue of
$1.7 billion and total expenditure of $3.7 billion. The Government debt is estimated
to be around $8.3 billion or 83.4% of GDP.
Overhaul tax
In his speech, the Minister emphasized the need for bold action. The following are laws, improve ease
some of the key initiatives:
• assistance to the tourism sector by reducing or removing various taxes of doing business,
• improving ease of doing business and stimulate
• overhaul of the tax laws, which includes certain changes the business
community have been urging the Government to make
investment.
• across the board (over 1,600 items) reduction or removal of fiscal and import
excise duties simplifying the customs regime
• abolished stamp duty
• strategic cuts in spending to reduce government expenditure. Government
has opted not to reduce civil servants' pay.
• pushing ahead with ready-to-go infrastructure and construction projects to
boost private sector investment.
The Minister shared his vision of building a more liberal economy, inclusive and fair
society, supported by a more streamlined system of revenue collection that
enhances ease and transparency of business.
There are lots of bold and encouraging initiatives, however, the success of the
same and the economic recovery will depend on the extent of private sector
participation, restoring jobs and Fiji once again being able to attract global visitors.
Further information and analysis of the various features and budget
announcements are detailed in the following pages.
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At a Glance
Forecast 223,597
$2.001 billion visitor arrivals in
2020
budget deficit Recovery
measures
$1,674
$8.256 billion • Health funding
billion Government Debt • Significant Tax
Revenue Reform
• Further FNPF relief
• First home-buyers
Reduced FNPF contributions of 5% to programme
continues
continue to 31 December 2021
21.7% 20.2% 83.4%
Net Deficit
1.0%
contraction of Inflation Rate Debt to GDP Ratio
economy As % of GDP
$100 million allocated for unemployment assistance scheme
$30 million allocated for MSME loan programme
$60 million allocated for Fiji Recovery Rebate Package
Bula Bubble and Bula Lanes
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p
Spotlight on the Budget
Budget 2019-2020 2019-2020 2020-2021 2021-2022
Budget Revised Budget Target
Estimates
$m $m $m $m
Revenue 3,491.7 2,699.1 1,673.6 1,805.7
Expenditure 3,840.9 3,536.4 3,674.6 2,357.1
Net (Deficit) (349.2) (837.3) (2,001.0) (551.4)
Loan Redemption (255.2) N/A (749.5) N/A
Budget Gross
(604.4) N/A 2,750.5 N/A
(Deficit)
Economic 2019-2020 2019-2020 2020-2021 2021-2022
Indicators Budget Revised Budget Target
$m $m $m $m
GDP at market prices 12,703.8 10,214.9 9,905.3 11,027.5
GDP at constant
11,282.7 10,592.3 8,293.7 9,463.6
prices
Growth rate 2.9% 1.3% (21.7%) 14.1%
Debt 5,978.60 6,705.4 8,256.4 8,807.8
Debt as a % of GDP 47.1% 65.6% 83.4% 79.9%
Interest payments 353.4 349.7 403.0 N/A
Interest payments - %
of total operating 13.94% 14.62% 16.64% N/A
expenditure
Revenue from sale of
80 206.1 - N/A
Government Assets
2019 (p) 2020 (f) 2021 (f) 2022 (f)
Visitor arrivals 894,389 223,597 447,195 715,511
(3.5%)
Inflation (0.9%) 1.4% 2%
(Jun)
Anticipated sugar
export quantity - 145.6 140.9 149.3 157.6
tonnes (’000s)
Jul-2017 Jul-2018 Jul-2019 Apl-2020
Government
562.2 586.7 673.3 674.1
Guarantees ($m)
Key: Total Contingent
f Forecast 1,067.6 1,173.2 1,264.6 1,262.5
Liabilities ($m)
p Provisional
N/A Data not available Source: Supplement to the 2020-2021 Budget Address
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State of the Nation
Economic Growth
Growth rate
2019 anticipated: -1.3%, amid the global slowdown, weak domestic demand and low business confidence.
2020 expected: -21.7%
2021 expected: +14.1%.
2022 expected: +6.5%.
Domestic Growth Rate
20.0
15.0
10.0
5.0
-
%
-5.0 2014 2015 (R) 2016 (R) 2017 (R) 2018 (F) 2019 (F) 2020 (F) 2021 (F) 2022 (F)
-10.0
-15.0
-20.0
-25.0
Budget Actual / Provisional
Source: Supplement to the 2020-2021 Budget Address
Overview 2019
The contraction in 2019 was due to the decline in public administration & defence, manufacturing, transport &
storage, fishing & aquaculture, and mining & quarrying. This negated the growth in the agriculture,
accommodation & food service activities, wholesale & retail trade, financial & insurance and electricity & gas
sectors.
Overview 2020
In 2020, the Fijian economy is projected to contract by 21.7 percent from the devastating impact of the COVID-19
pandemic on the tourism sector and its rippling effects on all other sectors of the economy. This is reportedly the
largest economic contraction in Fiji’s history.
Overview 2021 and 2022
The economy is projected to rebound in 2021 and 2022 by 14.1 percent and 6.5 percent, respectively. The
recovery is largely premised on the expectation that international travel will normalise together with various
measures in the budget aimed at rejuvenating private sector activity, investment and consumption spending and
higher Government borrowing to sustain public spending in certain areas.
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Budget Deficit
Net Deficit
Budget Actual/Revised Target
500.00
-
-500.00
$m
-1,000.00
-1,500.00
-2,000.00
-2,500.00
Source: Supplement to the 2020-2021 Budget Address
Net deficit - % of GDP Actual Budget / Revised
5.0
-
-5.0
-10.0
%
-15.0
-20.0
-25.0
Source: Supplement to the 2020-2021 Budget Address
Summary of Fiscal Position
2018-2019 2019-2020 2020-2021
Actual Revised Budget
Performance Projection Estimates
$ million $ million $ million
Total actual revenues $3,181.10 $2,699.10 $1,673.60
Total expenditures $3,600.30 $3,536.40 $3,674.60
Net deficit ($ 419.20) ($ 837.20) ($ 2,001.00)
Net deficit as a percentage of GDP 3.60% 8.20% 20.20%
Source: Supplement to the 2020-2021 Budget Address
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Balance of payments
Current account deficit Capital and financial account balance
(excluding reserves)
2019 $572.5 million (4.9% of GDP - excluding $1,268.1 million (10.8% of GDP)
aircraft)
2020 $992.4 million (10.7% of GDP - excluding $1,145.5 million (12.4% of GDP)
aircraft)
2021 projected $941.7 million (8.9% of GDP) $1,316.5 million (12.4% of GDP)
2022 projected $418.8 million (3.6% of GDP) N/A
Source: Supplement to the 2020-2021 Budget Address
Government debt
Government debt as at July 2020 is forecast to reach $6.7 billion or 65.6 percent of GDP (from 49.3% in 2018-
2019 fiscal year) due to an increased borrowing in the 2019-2020 COVID-19 Response Budget to accommodate
the higher deficit of 8.2 percent. The significant increase in debt to GDP is also attributed to the downward
revision of nominal GDP given the massive economic contraction projected for this fiscal year.
Government Debt
Actual Budget
10,000
9,000
8,000
7,000
6,000
$m
5,000
4,000
3,000
2,000
1,000
-
Source: Supplement to the 2020-2021 Budget Address
Debt - % of GDP
Actual Budget
90
80
70
60
50
%
40
30
20
10
0
Source: Supplement to the 2020-2021 Budget Address
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Inflation
Inflation Rates
6
4
2
%
0
-2
-4
Source: Supplement to the 2020-2021 Budget Address
Annual inflation at end of year 2019 was -0.9 percent. This was mainly due to lower prices in alcoholic
beverages, tobacco & narcotics; communications; housing, water, electricity, gas & other fuels and transport.
Inflation in June 2020 was -3.5 percent. This was largely attributed to lower prices for yaqona, vegetables, fruits,
kerosene and diesel. Inflation has been negative since October 2019.
Annual inflation at end of year 2020 is expected at 1.0 percent, reflecting the impact of the pandemic on domestic
and external demand, as well as global commodity prices such as crude oil. In line with the expected economic
recovery in 2021 and notwithstanding any major demand and supply side shocks, the year-end inflation for 2021
is forecast at around 1.4 percent and 2.0 percent in 2022. The demand-induced impact on inflation is dampened
by the major tax and customs duty reductions in this budget.
Exports and Imports
Impact Contributing factors
2019:
Exports Increase of $2,167.8 million or 2.7% Higher increase in re-exports and domestic exports.
Growth in re-exports was led by machinery & transport
equipment, mineral fuel and fresh fish.
Imports Reduction of $5,075.8 million or 8.6% Decreases in most categories of imports.
Expected 2020:
Exports Projected to contract by 23.9% Led by lower exports of mineral water, fresh fish, pine
woodchips, garments, taro, cement, machinery &
transport equipment, including re-exports.
Imports Reduction of $3,546.4 million or Decreases in most categories of imports.
30.1%
Expected 2021-2022:
Exports Anticipated to recover by 14.4 percent External demand for all categories of exports (except
and expand by 10.5 percent pine woodchips for 2021) are projected to rebound.
respectively
Imports Grow by 13.8% and 10% Increases in all categories of imports.
Source: Supplement to the 2020-2021 Budget Address
Monetary Policy
Monetary policy will continue to focus on adequate level of foreign reserves and low and stable inflation.
The RBF introduced the following measures to support the economy during the pandemic:
• the overnight policy rate was reduced to 0.25 percent from 0.50 percent in March 2020;
• quantitative easing measures were implemented to the tune of $440.0 million;
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• the revamped Disaster Rehabilitation and Containment Facility was allocated $100.0 million from the usual
$40.0 million;
• the allocation for the Import Substitution and Export Finance Facility4 was increased by $100.0 million to
$300.0 million; and
• RBF also purchased $280.4 million of Government bonds in the first half of 2020 to assist Government in
financing the deficit.
From a macro-prudential perspective, supervisory assessments continue to show that financial stability risks
remain moderate. Commercial banks and other financial institutions have assisted 19,000 customers totalling
$3.4 billion. The Association of Banks in Fiji (ABIF) have agreed to extend the support to these customers until
end of 2020, on a case by case basis.
By year-end, excess liquidity is expected to remain more than ample against the backdrop of higher Government
external loan drawdowns and lower import payments. Given excess liquidity and the current accommodative
monetary policy stance, interest rates are projected to drop further.
Interest Rates
Interest rates in the banking sector have generally trended downwards in recent months due to high liquidity and
subdued lending activity.
The weighted average outstanding lending rate for commercial banks was 6.15 percent in May 2020, 15 basis
points lower than December 2019. Similarly, the weighted average outstanding time deposit rate fell to 3.91
percent from 4.10 percent in December 2019. The weighted average savings deposit rate dipped from 1.10
percent to 0.90 percent from the end of last year.
Exchange Rates
The Nominal Effective Exchange Rate (NEER) index fell marginally over the year (-0.4%), indicating general
weakening of the FJD.
Similarly, the Real Effective Exchange Rate (REER) index fell marginally over the year (-0.3%), denoting a gain
in trade competitiveness largely on account of the persistent negative domestic inflation since October 2019.
Government Revenue
Direct and indirect tax collections
Direct tax Indirect tax
($ millions) ($ millions)
2018-2019 actual 754.4 2,026.9
2019-2020 projected 611.4 1,532.2
2020-2021 forecast 498.0 922.9
The key changes in indirect taxes for 2020-2021 include:
• Removal of STT.
• Removal of Stamp Duty
• VAT reverse charge applicable on supplies received from abroad will be repealed.
• ECAL will be reduced from 10% to 5%. The threshold for application of ECAL will be increased from
$1.25M to $3M for all prescribed services.
Other Government Revenue
The Government is expected to divest a further 24 percent of its shares in Energy Fiji Limited which is expected
to generate $200million.
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Government Expenditure
Total Operating Payments
Allocation of operating 2019-2020 2020-2021 2018-2019 2019-2020 2020-2021
payments % % actual expected projected
$ million $ million $ million
Personnel costs 41.4 40.8 1,017.0 990.1 987.4
Transfer payments 28.2 27.4 719.9 673.9 662.3
Interest payments 14.6 16.6 322.8 349.7 403.0
Supplies and consumables 11.0 10.7 277.4 264.6 259.1
Special expenditure 4.3 3.4 87.4 102.6 82.4
Other 0.5 1.1 3.9 11.8 27.2
The major operating grants provided in the Budget include: $ million
Water Authority of Fiji 75.1
Social Pension Scheme 55.3
Judiciary 53.4
Fiji National University 49.0
Fiji Revenue and Customs Service 40.0
Poverty Benefit Scheme 38.3
Free Education Year 1-8 31.6
University of the South Pacific 27.6
Free Education Year 9-13 29.2
Land Transport Authority 20.1
Fiji Roads Authority 14.1
Child Protection Allowance 12.4
Grant to Fiji’s Servicemen’s After Care Fund 11.5
Legal Aid Commission 10.1
Parliament 8.6
Fiji Independent Commission Against Corruption 8.0
Tourism Fiji 6.7
Bus Fare Programme for Elderly/ Disabled persons 6.5
Investing Activities
2020-2021
2018-2019 2019-2020 projected /
actual expected budged
$ million $ million $ million
Investing revenue 24.1 216.1 7.3
Capital grants and transfers 972.5 934.0 1,022.4
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The allocations for major capital grants and transfers during 2020-2021 include:
Activity $ million
Fiji Roads Authority 334.7
Water Authority of Fiji 120.3
Unemployment Benefit 100.0
Tertiary Loan Scheme – Tuition 66.9
Fiji Recovery Rebate Package 60.0
Tertiary Loan Scheme – Accommodation 46.8
National Toppers Scholarship Scheme – Local Scholarship
43.4
Scheme
Concessional Loans to MSMEs 30.0
Sugar Stabilisation Fund 30.0
Tourism Fiji Marketing Grant 25.0
COVID-19 Contingency Fund 25.0
Ongoing Rehabilitation and Construction of Schools and Public
20.0
Buildings
Fertiliser Subsidy – FSC 15.6
Grant to Walesi 10.3
Committee on Better Utilisation of Land and Agriculture Marketing
8.9
Authority
DigitalFIJI 9.0
Housewiring for Grid Extension Project 7.9
Construction of New CWM Hospital Maternity Unit 7.0
Construction of Prime Minister’s Office Building 7.0
Online Business and Construction Licensing System 6.7
Total purchase of physical non-current assets, including spending on capital construction and purchases, during
2018-2019 amounted to $161.2 million. The spending is anticipated to increase to $163.9 million in 2019-2020
and to $185.9 million in 2020-2021.
Government Debt
The following table summarises total Government debt:
July 2019 July 2020
July 2016 July 2017 July 2018 Revised projected
$ million $ million $ million $ million $ million
Domestic debt 3,245.0 3,300.8 3,763.0 4,278.5 4,955.1
External debt 1,262.6 1,370.9 1,457.5 1,456.8 1,750.3
Total debt 4,507.7 4,671.7 5,220.5 5,735.2 6,705.4
Debt (as a % of GDP) 44.7% 43.5% 46.0% 49.3% 65.6%
Domestic/Total Debt 72.0% 71.0% 72.0% 75.0% 74.0%
External/Total Debt 28.0% 29.0% 28.0% 25.0% 26.0%
Source: Supplement to the 2020-2021 Budget Address
Domestic Debt Stock
The domestic capital market remains the major source of borrowing for Government, with institutional investors like
FNPF, insurance companies and commercial banks playing an active role. Major debt instruments for the domestic
market include Fiji Infrastructure Bonds (FIB), Fiji Bonds, Viti Bonds and Treasury Bills.
Total domestic debt in 2019 was equivalent to 36.8% of GDP.
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External Debt Stock
The table below summarises Government’s external debt position from 2016 to 2020.
July 2019 July 2020
July 2016 July 2017 July 2018 Revised projected
$ million $ million $ million $ million $ million
Loans 846.9 968.6 1,037.2 1,023.8 1,314.6
Global Bonds 415.7 402.3 420.3 433.0 435.7
Total External Debt 1,262.6 1,370.9 1,457.5 1,456.8 1,750.3
External Debt to GDP (%) 12.5 12.8 12.8 12.5 17.1
Source: Supplement to the 2020-2021 Budget Address
Global bonds comprised around 24.9% of the total external debt portfolio, bilateral and multilateral loans constituted
75.1%. Majority of the external debt is denominated in US dollars (73.2%) followed by the Chinese Yuan (23.8%),
Japanese Yen (2.9%) and the Euro (0.1%).
Contingent Liabilities
Government’s explicit contingent liabilities are around $1.2 billion as of July 2019, equivalent to 7.8% of GDP.
This comprised of Government guarantees of $591.2 million equivalent to 5.8% of GDP and other contingent
liabilities at $622.2 million.
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Tax Measures
Unless otherwise specified, excise tax, fiscal import duty, import excise duty and Environment Climate Adaptation
Levy (“ECAL”) changes are expected to be effective from 18 July 2020 and all other tax changes are expected to
be effective from 1 August 2020, unless stated otherwise.
Direct Tax Measures
Policy Description
1. Social Responsibility Tax (“SRT”) • The ECAL component of SRT will be reduced from 10% to 5%. The
and Environment & Climate new SRT and ECAL structure will be as follows:
Adaptation Levy (“ECAL”) Chargeable SRT ECAL1
Income
13% of excess over 5% of excess over
270,001 – 300,000
$270,000 $270,000
5,400 + 14% of excess 5% of excess over
300,001 – 350,000
over $300,000 $300,000
14,900 + 15% of 5% of excess over
350,001 – 400,000
excess over $350,000 $350,000
24,900 + 16% of 5% of excess over
400,001 – 450,000
excess over $400,000 $400,000
35,400 + 17% of 5% of excess over
450,001 – 500,000
excess over $450,000 $450,000
500,001 – 46,400 + 18% of 5% of excess over
1,000,000 excess over $500,000 $500,000
161,400 + 19% of 5% of excess over
1,000,000 +
excess over $1,000,000 $1,000,000
1
We understand ECAL will apply at 5% on income exceeding $270,000 and not as noted in this table. This needs to be
appropriately clarified.
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Policy Description
2. Advance Payments of Tax • The rules for advance tax payments as amended in the COVID-19
Response Budget will be made permanent.
• Companies will be required to make advance tax payments in 9
instalments at the rate of 111/9%.
• Additionally, the application of penalties was removed in the
COVID-19 Response Budget and was valid until 31 December
2020. This waiver continues to apply for the next 3 years.
3. Debt Forgiveness • As announced in the COVID-19 Response Budget, debt
forgiveness is not subject to income tax for all debt outstanding
forgiven from 1 April 2020 up to 31 December 2020.
• The existing policy and the forgiveness period for the new debt is
extended until 31 December 2021.
• In addition, debts created between 1 April 2020 to 31 December
2021 (and forgiven) will also be eligible for income tax exemption
under the debt forgiveness provisions.
4. Thin Capitalisation • The debt-to-equity ratio will be increased from the current 2:1 to
3:1.
• Therefore, a higher amount of tax deductibility in relation interest
will be allowed for a foreign controlled Fiji company.
5. Depreciation write-off incentive • A 100% write-off on purchase of fixed assets of up to $10,000 used
for business purposes was announced in the COVID-19 Response
Budget.
• In light of the current economic situation, this policy will be made
permanent.
6. Accelerated Depreciation • A 100% write-off for the construction of a new commercial and
industrial building, provided that approvals are obtained prior to 31
December 2020, was made available in the COVID-19 Response
Budget.
• This incentive will be made permanent.
7. Tax deduction for reduction of • As part of the government assistance package to businesses, a tax
commercial rent deduction was accorded to landlords for reduction of commercial
rent. The deduction applied to existing rental contracts whereby
landlords need to provide record of rental income received for the
past 6 months.
• The reduction refers to the rent payable after 01 April 2020 to 31
December 2020.
• This tax deduction will be further extended until 31 December 2021.
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Policy Description
8. New Medical Investment Incentive The existing package will be repealed and replaced with the following:
i. Private Hospital
• Income tax exemption for the establishment of a new hospital
based on the following capital investment levels:
Capital Investment ($) Tax Holiday
$2,500,000 - $5,000,000 7 years
$5,000,001 - $10,000,000 13 years
More than $10,000,000 20 years
An investment allowance will be available for the refurbishment,
renovation and extension of a hospital based on the following
capital investment levels:
Capital Investment ($) Tax Deduction
$500,000 - $1,000,000 30%
More than $1,000,000 60%
ii Ancillary Medical Services
• Income tax exemption for the establishment of a new ancillary
medical service centre based on the following capital
investment levels:
Capital Investment ($) Tax Holiday
$500,000 - $3,000,000 7 years
$3,000,001 - $10,000,000 13 years
More than $10,000,000 20 years
• An investment allowance will be available for the refurbishment,
renovation and extension of an ancillary medical service centre
based on the following capital investment levels:
Capital Investment ($) Tax Deduction
$500,000 - $1,000,000 30%
More than $1,000,000 60%
9. New Incentive Package for • A new incentive package will be introduced for investment in the
Subdivision of lots business of sub-division of lots for residential or commercial
purpose. The following benefits will be available:
Capital Investment ($) Tax Deduction
Less than $1,000,000 20%
$1,000,001 - $3,000,000 30%
$3,000,001 - $7,000,000 40%
More than $7,000,000 60%
• Duty concession will be available on importation of raw materials,
equipment and machinery for the establishment of the project.
• Income tax exemption will be available on developer profits for
proceeds of sale.
• The new Incentive Package for Sub-division of lots will be
applicable from 1 August 2020 to 31 July 2022.
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Policy Description
10. New Incentive Package for Private • A new incentive package will be introduced for private companies
sector investment in buildings investing in buildings to be used by government or entities
approved by government.
• The following benefits will be available:
- Duty concession will be available on importation of raw
materials, plant, machinery and equipment for the
establishment of the project.
- Tax exemption will be available on rental income.
11. Residential Housing Development • Regulation 12, Part 3 of the Income Tax (Residential Housing
Incentive – Development of Development Package) Regulations 2016 will be extended to
Housing for Public Rental include duty concessions for the importation of raw materials,
machinery and equipment for the establishment of the housing
project.
12. Tax incentives for Corporate • To support post COVID-19 recovery through provision of additional
Bonds avenues for corporate financing, the issuance of corporate bonds
will be incentivized as follows:
- A 150% tax deduction will be allowed to companies for listing
of corporate bonds with the South Pacific Stock Exchange
(SPSE). This deduction will be applied on the cost of listing.
- A 150% tax deduction will be allowed on interest paid on
corporate bonds.
- Interest income earned on corporate bonds will be exempt
from tax.
13. Fiji National Provident Fund • To provide immediate financial support to employers during this
(“FNPF”) Contribution time of financial hardship, the mandatory FNPF contribution was
reduced to 5 percent in the COVID-19 Response Budget. This
policy is further extended until 31 December 2021.
• Employer contribution exceeding the 5% mandatory FNPF
contribution and up until 10%, will be allowed a tax deduction of
150% of the excess.
• The deduction will be applied retrospectively from 1 April 2020.
14. Capital Gains Tax (“CGT”) • CGT exemption threshold for capital gains made by a resident
individual or Fijian citizen will be increased from $16,000 to
$30,000.
15. Income Tax Act – Section 2: • Depreciable Assets will now be taxed under CGT rules and not
Definition of Capital Asset income tax rules
• Therefore, the definition of Capital Asset in Section 2 of the Income
Tax Act 2015 will be extended to include depreciable assets and
section 34 will be amended to clarify rules on disposal of
depreciable assets.
16. Fringe Benefit Tax (“FBT”) • A tax deduction will be allowed to the employer for FBT.
Consequently, Section 22 of the Income Tax Act will be amended.
17. Non-Resident Withholding Tax • Section 10 will be amended to exclude accommodation provided or
reimbursed, airfare, transport and allowances from the application
of Non-Resident Withholding Tax.
18. Permanent Establishment • The Permanent Establishment Rules will be amended to allow
consistent application with international taxation rules.
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Policy Description
19. Tax deduction on loans taken for • A tax deduction will be allowed on loan (inclusive of both principal
medical purposes amount and interest accrued) taken from a licensed financial
institution for medical treatment.
• The applicant will be required to provide medical certificate, details
of the loan facility and receipts to confirm expenses.
• The following expenses are eligible:
- hospital expenses;
- food and accommodation if part of the package with the
hospital;
- international air fares; and
- interest expenses incurred with the loan (in case of
consolidated loan), interest deduction will be allowed
proportionately.
20. Corporate Reorganization • Deferral rules for company incorporation will be introduced.
• Transfer of assets by an individual shareholder to a company at the
point of incorporation will not be subject to tax.
• Subsequently, disposal of assets will be subject to normal tax.
21. Donation to the Sports Fund • The threshold to qualify for the 150% tax deduction available for
donations to the Sports Fund will be removed.
• The recipient of the donation must be registered with the Fiji
National Sports Commission.
22. Tax deduction to hire local artists • A 150% tax deduction will be allowed to hotels and resorts that hire
local artists such as craftsmen, dancers and musicians.
Tax Administration Act
Policy Description
1. Audit Penalty • 300% VAT evasion penalty and 75% income tax audit penalty will
be replaced with a low, harmonized and progressive audit penalty
regime.
• Audit penalty rates for tax shortfall for Income Tax, VAT and Other
Taxes will be 15% per annum and will be computed using the
simple interest formula. The same rate and methodology will be
applied for tax benefits obtained through overestimation of tax
losses.
• Consequently, section 46 and Section 46A will be amended and
section 46B will be removed.
Stamp Duty Act
Policy Description
1. Stamp Duty • Stamp Duty Act will be repealed.
Airport Departure Tax Act
Policy Description
1. Review of Airport Departure Tax • The Airport Departure Tax will be reduced from $200 to $100.
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Tax Measures | Strategic Direction | Budget Allocations | Appendices
Service Turnover Tax Act
Policy Description
1. Service Turnover Tax (“STT”) • The 6% STT on all prescribed services will be removed.
Value Added Tax (“VAT”) Act
Policy Description
1. VAT Monitoring System (“VMS”) • The implementation of the VMS as captured in the Electronic Fiscal
Device (“EFD”) Regulations will be further deferred to 01 January
2022.
2. VAT Reverse Charge • The provisions of VAT Reverse Charge applicable on supplies
received from abroad will be repealed.
3. VAT on Residential Rents • A person engaged in the supply of residential accommodation,
irrespective of the annual gross turnover will be exempted from
VAT.
Environment and Climate Adaptation Levy Act
Policy Description
1. ECAL • The ECAL will be reduced from 10% to 5%.
• The threshold for application of ECAL will be increased from
$1.25m to $3m for all prescribed services.
2. ECAL on Superyacht Charter. • ECAL on Superyacht charter will be reduced from 10% to 5%.
3. ECAL on White Goods • ECAL on white goods will be reduced from the current 10% to 5%.
The goods are as follows:
- Smart phones;
- Air conditioners;
- Refrigerators and Freezers;
- Televisions;
- Washing Machines;
- Dryers;
- Dishwashers;
- Electric Stoves;
- Microwaves;
- Electric Lawn Mowers;
- Toasters;
- Electric Jugs; and
- Hair Dryers.
4. Exemption of ECAL on concession • The ECAL Act will be amended to include concession code 232,
codes 232, 284 and 285 284, and 285 for exemption of ECAL on vehicles and white goods
imported under duty concession.
5. Refund of ECAL in line with the • The ECAL Act will be amended to include provisions of refund for
duty drawback provisions of ECAL paid on customs declaration in instances of a re-export.
Customs Act
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Tax Measures | Strategic Direction | Budget Allocations | Appendices
Policy Description
6. ECAL on Motor Vehicles • ECAL on motor vehicles will be reduced from the current 10% to
5%.
ECAL Structure on Hybrid Vehicles
Cylinder Capacity Description Current ECAL New ECAL
All New 10% 5%
Used 10% 5%
ECAL Structure on Non-Hybrid Vehicles
Cylinder Capacity Description Current ECAL New ECAL
All New 10% 5%
Used 10% 5%
Customs and Excise Changes
Please click on the button below to go to Appendix A which contains details of the Customs and Excise
changes.
Appendix A
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Strategic Direction
Medium Term Fiscal Strategy
The Minister indicated that the unanticipated arrival of the pandemic necessitated a recalibration of the 2019-
2020 Budget. In the COVID-19 Response Budget, total revenues were revised downward from $3.5 billion to $2.5
billion (a reduction of $984 million or 28.0%), while total expenditures were reduced from $3.8 billion to $3.5
billion (a reduction of $304 million or 7.9%).
Subsequently, the net deficit grew to around $1.0 billion, equivalent to 8.2 percent of GDP, a substantial increase
from the 2.7 percent of GDP originally budgeted. Government had increased its borrowing to provide additional
resources for COVID-19 prevention and containment measures, unemployment assistance and the continuation
of important Government services.
As a result of the above, the fiscal policy environment has become very challenging as revenue levels continue to
decline. The Minister stated that increased external financing through multilateral partners like the Asian
Development Bank (“ADB”), Asian Infrastructure Investment Bank (“AIIB”), World Bank, and bilateral partners like
the Japanese Government will help sustain expenditure, while quantitative easing measures through RBF
purchase of Government bonds and other domestic financing will assist further.
Government will also continue to pursue long-term structural adjustments to diversify the economy and realise
Fiji’s true economic potential. Long-term improvements in other sectors are necessary to reduce our over-
dependence on tourism. The Minister communicated that reforms will be directed towards improving the ease of
doing business to attract private sector investments and Foreign Direct Investment, enhancing access to finance
for higher investment opportunities, reducing tax rates and streamlining tax administration to support economic
growth and stability.
The Minister expressed that with continued uncertainty surrounding the virus, adapting and adjusting to the
evolving socio-economic environment in the medium-term will be challenging and Fiji’s ability to quickly recapture
trade and tourism markets once borders reopen is vital.
The following table summarises Government’s medium-term fiscal targets:
Fiscal Targets 2020-2021 2021-2022 2022-2023
Budget Target Target
$ million $ million $ million
Revenue: 1,673.6 1,805.7 1,886.2
As a % of GDP 16.9% 16.4% 16.3%
Tax revenue 1,465.7 1,626.9 1,708.3
Non-tax revenue 207.9 178.8 177.9
Expenditure: 3,674.6 2,357.1 2,233.6
As a % of GDP 37.1% 21.4% 19.3%
Net deficit (2,001.0) (551.4) (347.4)
As a % of GDP (20.2%) (5.0%) (3.0%)
Debt: 8,256.4 8,807.8 9,155.1
As a % of GDP 83.4% 79.9% 79.1%
GDP at market prices 9,905.3 11,027.5 11,578.9
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Government Policies
Government’s policies relating to revenue, expenditure and debt are summarised as follows.
Revenue
The framework focuses on rebuilding the competitiveness of the tourism industry, raising domestic demand by
lowering prices of goods and services, promoting competition, improving ease of doing business, safeguarding
employment and household incomes and reviving overall economic activity. The key revenue principles are as
follows:
• Introduce bold taxation and customs tariff reductions to rebuild competitiveness of the tourism industry and
support economic recovery.
• Provide tax relief, flexible payment arrangements and targeted tax incentives to assist business cash flows.
• Lower prices of food and household items, consumer goods, equipment, machinery, motor vehicles and
other items through major reform to the customs tariff.
• Ensure simple, streamlined taxation and customs administrative processes with a focus to improve ease of
doing business.
• Review tariff protection for local manufacturers in view of product quality, domestic pricing and burden on
consumers.
• Promote development of the domestic capital market.
• Maintain an overall simple, equitable and non-distortionary tax system and tax laws.
Expenditure
The budget focuses on providing adequate funding to support the economic recovery and ensuring access to key
public services. Expenditure policy is guided by the following principles:
• Reprioritise expenditure to support economic recovery, temporary unemployment assistance and key
capital projects to create jobs.
• Review existing expenditure programs and scale back spending in non-priority areas, and temporarily
suspend certain initiatives.
• Comprehensive review of the civil service wage bill and curtail remuneration-related expenditure including
overtime, meal claims and other allowances.
• Control expenditure on travel, telecommunications, office supplies and consumables, and other incidentals.
• Defer low value-for-money expenditure programmes and focus on high economic impact spending.
• Review major expenditures in the Education sector including the Tertiary Education Loans Scheme
(“TELS”) and National Toppers Scheme (“NTS”).
• Review sugar industry expenditure policies to reduce the burden on Government and taxpayers.
• Mandate proper feasibility and economic cost benefit analyses as a criteria for appraisal and selection of
new projects.
• Ensure resources are allocated based on a multi-year perspective and dependent on implementation
capacity of agencies.
• Continue funding for social protection initiatives and ensuring it is well targeted.
• Provide adequate funding for road maintenance, public utilities and continuation of essential social services
like health and medical services.
• Thorough monitoring of projects and budget utilisation by the Ministry of Economy.
Debt
• Lower the cost of debt through concessional financing from multilateral and bilateral partners, including
refinancing of the global bond due in October 2020.
• Consistent domestic market operations, clear investor guidance and market signalling for market
development.
• Maintain an optimal cost and maturity structure for the debt portfolio to ensure prudent liability management.
• Development of the domestic bond market to focus more on liquidity, transparency, secondary market
trading, settlement mechanisms and investor diversification.
• Put the debt to GDP ratio back on a downward trajectory in the medium-term.
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Budget Allocations
Please click on the icons for more details.
Ministry of Housing and Community Development - $13.5 million, a decrease of $0.2 million from
the 2019-2020 revised estimate.
Ministry of Education, Heritage and Arts - $450.6 million, a decrease of $22.26 million from the
2019-2020 revised estimate.
Higher Education Institutions - $81.4 million, a decrease of $21.3 million from the revised
estimate for 2019-2020.
Ministry of Health and Medical Services - $394.3 million, an increase of $46.84 million over the
2019-2020 revised estimate.
Ministry of Agriculture - $65.3 million, an increase of $3.47 million over the 2019-2020 revised
estimate.
Ministry of Sugar Industry –$53.6 million, a decrease of $58.88 million over the 2019-2020
revised estimate.
Fiji Roads Authority (“FRA”) - $348.9 million, an increase of $72.4 million from the 2019-2020
estimate.
Water Authority of Fiji - $195.4 million, an increase of $12.4 million from the 2019-2020 estimate.
Ministry of Infrastructure and meteorological - $30.6 million, a decrease of $4.7 million from the
2019-2020 estimate.
Ministry of Waterways and Environment - $15.9 million, a decrease of $5.2 million from the 2019-
2020 estimate.
Ministry for Women, Children and Poverty Alleviation - $159 million, an increase of $14.4 million
from the revised 2019-2020 estimate.
Ministry of Youth and Sports - $11.8 million a decrease of $4.5 million from the 2019-2020
estimate.
Fiji Police Force - $200.6 million, an increase of $37.3 million from the revised 2019-2020
estimate.
Republic of Fiji Military Forces - $81.0 million, a decrease of the $8.6 million from the revised
2019-2020 estimate.
Ministry of Commerce, Trade, Tourism and Transport $87.1 million, a decrease of $4.6 million
from the revised 2019-2020 estimate.
Ministry of Civil Service - $3 million, no significant movement from the revised 2019-2020
estimate.
Please click on the button below to go to Appendix B for full details of budget allocations and Government’s
other key initiatives.
Appendix B
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Appendices
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Appendix A: Customs and Excise Import
Changes
Customs Act
Policy Description
1. Age limit on passenger motor • The age limit requirement on non-hybrid passenger motor vehicles
vehicles will be removed. Vehicles are still required to be Euro 4 compliant.
• The age limit requirement for hybrid passenger motor vehicles
remains at 5 years.
2. Luxury Vehicle Levy • Luxury vehicle levy imposed on passenger motor vehicles will be
removed.
3. Objection to Tax Decision • Customs Act will be amended to allow a taxpayer or importer
dissatisfied with a tax decision to lodge an objection with the CEO,
FRCS.
4. Trans-shipment Levy (Fish Levy) • The Fish Levy of $450 per ton will be removed.
5. Importation of mobile plant, • A restriction will be imposed on the importation of mobile plant,
machinery and cranes machinery and cranes exceeding 32 tonnes as per Section 80 Land
Transport Authority Regulations
Local Excise Duty
Policy Description
1. Decrease in Local Excise Duty on • The Local Excise Rate on Alcohol will be reduced by 50%.
Alcohol
New Local Excise Rates for Alcohol
Description 2019-2020 Rates 2020-2021 Rates
Ale, Beer, Stout and other fermented liquors of an alcoholic $3.43/litre $1.72/litre
strength of 3% or less
Ale, Beer, Stout and other fermented liquors of an alcoholic $3.99/litre $2.00/litre
strength of 3% or more
Potable Spirit Not Exceeding 57.12 GL $75.47/litre $37.74/litre
Potable Spirit Exceeding 57.12 GL $132.17/litre $66.09/litre
Still Wine $5.32/litre $2.66/litre
Sparkling Wine $6.07/litre $3.04/litre
Other fermented beverages: Still $5.32/litre $2.66/litre
Other fermented beverages: Sparkling $6.07/litre $3.04/litre
Ready to Drink Mixtures of any Alcohol and non-alcoholic $2.45/litre $1.23/litre
beverages of an alcoholic strength by volume of 11.49% or less
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Customs Tariff Act
Policy Description
1. Reduction in Fiscal Duty on • Import duty on used passenger motor vehicles will be reduced by 75%.
passenger motor vehicles The new import duty structure will be as follows:
Tariff Structure on Hybrid Vehicles
Cylinder Current Fiscal New Duty
Description
Capacity Duty Rates
Less than New Free Free
1,500 cc Used $4,000 per unit $1,000 per unit
1,500 cc to New Free Free
2,500 cc Used $5,000 per unit $1,250 per unit
2,500 cc to New Free Free
3,000 cc Used $6,000 per unit $1,500 per unit
Exceeding New Free Free
3,000 cc Used $13,000 per unit $3,250 per unit
Tariff Structure on Non-Hybrid Vehicles
Current Fiscal New Duty Rates
Cylinder Capacity Description
Duty
New 15% 5%
Less than 1,000 cc 32% or 15% or
Used
$7,000/unit $1,750/unit
New 15% 5%
1,000 cc to 1,500 cc 32% or 15% or
Used
$11,500/unit $2,875unit
New 15% 5%
1,500 cc to 2,500 cc 32% or 15% or
Used
$16,000/unit $4,000/unit
New 32% 15%
2,500 cc to 3,000 cc
32% or 15% or
Used
$23,000/unit $5,750/unit
New 32% 15%
Exceeding 3,000 cc 32% or 15% or
Used
$28,500/unit $7,125/unit
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Policy Description
2. Reduction in Fiscal Duty and • To generate demand and business activity, Fiscal Duty on white goods
Removal of Import Excise on will be reduced while Import Excise will be removed as follows:
white goods
Current Rates New Rates
Goods Fiscal Import Fiscal Import
VAT VAT
Duty Excise Duty Excise
Smart Free Free 9% 0% 0% 9%
phones
Air 15% 10% 9% 5% 0% 9%
conditioners
Refrigerators
15% 5% 9% 5% 0% 9%
and Freezers
Televisions 15% 10% 9% 5% 0% 9%
Washing
15% 10% 9% 5% 0% 9%
Machines
Dryers 15% 10% 9% 5% 0% 9%
Dishwashers 15% 10% 9% 5% 0% 9%
Electric 15% 10% 9% 5% 0% 9%
Stoves
Microwaves 15% 10% 9% 5% 0% 9%
Electric Lawn
5% Free 9% 5% 0% 9%
Mowers
Toasters 15% 10% 9% 5% 0% 9%
Electric Jugs 15% Free 9% 5% 0% 9%
Hair Dryers 15% 10% 9% 5% 0% 9%
3. Concession for importation by • Concession for importation by a private individual will be extended to
Private Individual importation by sea freight in addition to the current air freight.
• The concession is further extended by increasing the maximum threshold
of goods imported from $400 to $2,000.
4. Concession code 241 – • Concession code 241 will be extended to include tickets rolls in addition to
concession for bus operators new chassis, engines, identifiable fixtures and components, ticketing
machines and ticketing machine parts.
• Additionally, the fiscal duty on identifiable fixtures and components will be
reduced from 5% to zero.
5. Concession code 223B – • Concession code 223B will be introduced to allow the importation of
concession university, school educational materials imported by Fiji Airways Aviation Academy (FJAA)
and other educational for training purposes at Free Fiscal, Free Import Excise and 9% VAT.
institution
6. Concession code 231 • Concession code 231 will be extended to include the importation of
innovative packaging materials at the rate of Free Fiscal, Free Import
Excise and 9% VAT.
7. Concession code 257 • Concession code 257 will be expanded to include the importation of
hydroponic and greenhouse goods at the rate of Free Fiscal and Free
Import Excise and 9% VAT.
Customs Tariff Act: Import Duty Rate Changes
Please refer to the separate attachment for details of the import duty rate changes.
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Appendix B: Budget Allocations and Other
Key Initiatives
Poverty Alleviation, Social Empowerment and Rural Development
The poverty alleviation programmes, and key social empowerment initiatives of the Government are as follows:
Social Welfare
Key initiatives
Poverty Benefit Scheme Budget allocation of $38 million.
Social Pension Scheme Provides a social safety net for elderly citizens who are 65 years of age and older who
have no form of income and have never been beneficiaries of a superannuation
scheme.
A sum of $55 million has been allocated.
Food Voucher Programme Budget allocation of $1.2 million.
for Rural Pregnant Mothers
Child Protection Allowance Programme is targeted at (single parent families, deserted spouses, widows,
prisoner dependents, foster parents/guardians and children under the care of
the State.)
Budget allocation of $12.4 million.
Bus Fare Assistance for Budget allocation of $6.5 million.
Old/Disabled Persons
Persons with Disability Budget allocation of $9.3 million.
Social Welfare Top-Up Budget allocation of $7.8 million.
(DFAT)
Social Welfare Budget allocation of $2.2 million.
Management Information
System
Women and Gender Development
Key initiatives
Women’s Plan of Action Budget allocation of $0.45 million.
(“WPA”)
Women’s Institutions Budget allocation of $0.5 million.
Domestic Violence A sum of $0.2 million to support the operations of the 24 hour Domestic Violence
Helpline Helpline which will provide a platform for reporting domestic violence and sexual
assault to the relevant Authorities.
Fiji “Barefoot College” This is a joint initiative between Government and Barefoot College International to
construct a vocational college targeted at a rural-based women. Budget allocation $3
million.
Construction of aged Care Budget allocation of $3.2 million.
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Housing
Key initiatives
Formalisation of Informal $2 million allocation for upgrading and development of informal settlements on State
Settlements and iTaukei land.
Assisting People Living A budget allocation of $0.1 million.
with Disabilities (PLWD)
Public Rental Board (PRB) A sum of $1.3 million has been allocated to subsidise the rental obligations of PRB
Subsidy tenants.
Housing Assistance Relief A budget allocation of $0.4 million for re-construction, renovation and general
Trust (HART) maintenance of the existing homes.
Koroipita Model Town A budget allocation of $0.5 million.
First Home Purchase $3 million allocation for eligible household with a combined annual income below
Programme $50,001 to receive a grant of $15,000 if they buy a house or $30,000 if they build a
house.
$2 million allocation for eligible household with a combined annual income between
$50,001 to $100,000 to receive a grant of $5,000 if they buy a house or $20,000 if
they build a house.
First Land Purchase $1.0 million allocation.
Programme
Surveying for Regulation of A budget allocation of $0.2 million.
Lease and Land Title
Social Housing Assistance $1.0 million allocation for construction of homes in rural and maritime areas on a cost-
sharing basis that are destroyed in disasters or fires, and under the Family Assistance
Scheme.
Housing Assistance to Fire $0.1 million allocation to assist fire victims with rebuilding their homes through a grant
Victims of $5,000 with a household income below $50,000 and who have proper leases, but
lack insurance.
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Priority Sectors
Education, Heritage and the Arts
Some of the budget allocations are as follows:
• Contribution to Fiji Higher Education Commission - $1.9 million
• Contribution to Transport Assistance - $21.4 million
• Contribution to Tertiary Scholarships and Loans Board - $1.6 million
• Construction of New Facilities for Government Schools - $0.2 million
• Completion of New Bau College - $ 0.6 million
• Aid to Water, Sanitation and Hygiene Programme (UNICEF) - $1.4 million
• Aid to Education Programme (UNICEF) - $0.6 million
• Aid to Fiji Higher Education Improvement Programme 2016-2021 (NZMAT) - $0.4 million
• Free education programme for Year 1 to Year 13 students - $60.7 million
• Transfer allowance for primary education - $0.2 million
• Upgrade and Maintenance of Non-Government Primary Schools - $0.2 million
• Construction of New School Facilities for Non-Government Primary Schools - $0.2 million
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• Grant to Special Schools - $1.0 million
• Tuition subsidy for Early Childhood Care and Education (ECCE) - $2.5 million
• Boarding School Food and Supplies in government secondary schools - $ 2.8 million
• Printing of textbooks - $2.0 million
• Vocational Grant to Tertiary Technical Education - $0.3 million
• Examination expense - $1.4 million
• Grant to Fiji Museum - $0.5 million
• Grant to Fiji Arts Council - $0.3 million
• Upgrade of Fiji Museum - $0.2 million
• Rehabilitation of Levuka World Heritage Structure - $0.2 million
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Health
Some of the programmes are as follows:
• Doctors salaries - $69.5m
• Medical HR contingency - $2.6m
• Overseas Medical and Consultancy Services - $1.78m
• Charter of Aircraft: medical evacuation of high-risk patients - $2.2m
• COVID-19 Response and Preparedness (ADB) - $4.48, COVID-19 Emergency Response Project (World
Bank) - $6.76, COVID-19 contingency fund - $25m
• Upgrade and Maintenance of Urban Hospitals and Institutional Quarters - $2m
• Construction of New CWM Hospital Maternity Unit - $7m
• Maintenance of Sub-Divisional Hospitals, Health Centres and Nursing Stations - $2m
• Completion of Navosa Sub-Divisional Hospital - $4.4m, completion of Rotuma Hospital $2.3
• Upgrade of Labasa and Lautoka Hospitals - $5.08m
• Refurbishment of CWMH Emergency Department - $0.64m
• Purchase of equipment for urban and sub-divisional hospitals, health centres and nursing stations - $4.82m
• Drugs and medical equipment - X-Ray Materials $1.8m, Dental Prosthetic Materials $1.5m, Dressings $1m,
Vaccines $5.8, Consumables and Medicine $23.7, Laboratories $9.1,
• Bio-Medical Equipment - Urban and Sub-Divisional Hospitals - $7m
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Infrastructure Development and Public Utilities
Electrical Grid extensions, Bridges and Electrical project
Major allocations under the Ministry of Infrastructure and Transport budget are as follows:
• Operating Grant to LTA to provide a safe, efficient, and sustainable land transport system - $20.1 million
• Shipping Services Subsidy: supports cost-effective shipping services to maritime routes that are otherwise
considered to be uneconomical - $2.6 million
• Rehabilitation of Diesel Schemes for the Relocated Communities and Re-constructed Homes: funds the
completion of rehabilitation works on diesel schemes that were damaged by TC Winston - $1.3 million
• Housewiring for EFL Grid Extension Programme - $7.9 million
• Solar Home Systems Programme - $0.2 million
• EFL Subsidy Programme - $5.2 million
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